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High court stays case over New Mexico investments

By Barry Massey

Associated Press

Posted:
04/03/2014 01:32:29 PM MDT

SANTA FE >> New Mexico's highest court has temporarily put on hold a lawsuit by a state agency seeking to recover money for investment deals it contends were influenced by political considerations during former Gov. Bill Richardson's administration.

The move by the Supreme Court came earlier this week at the request of former pension fund investment officer Frank Foy, who brought whistleblower lawsuits in 2008 and 2009 alleging a pay-to-play scheme involving state investments.

Victor Marshall, Foy's lawyer, said Thursday that the latest dispute raises open-government questions that go beyond the investment case. He's asking the high court to take further action, including forcing the State Investment Council to change how it handles settlements with brokers, money managers and other investment officials sued by the agency in 2011.

Foy went to the Supreme Court after a district court judge in Santa Fe approved settlements of $525,000 reached by the Investment Council with four investment executives, who also are among the defendants in one of Foy's whistleblower cases. The executives have denied any wrongdoing.

Foy, in his request to the high court, objects to an Investment Council policy that allows a three-person subcommittee to hold closed-door meetings to approve settlements. The settlements don't have to be voted on publicly by the council if the subcommittee unanimously agrees to the financial deal.

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"There can be no doubt that many public bodies would love to delegate authority to secret subcommittees which would operate without any notice or records. This delegation maneuver would be a great convenience to public bodies, as they would no longer have to act in public," Marshall wrote in Foy's filing with the Supreme Court. "There are many state agencies and county commissions and city governments and school boards that would love to adopt this tactic, if this court were to allow it."

The Investment Council's settlements dismiss other legal claims against the executives, and Foy contends that would undermine his efforts on behalf of the state to potentially recover larger amounts for investment losses suffered by the state.

The Supreme Court on Tuesday issued a stay to temporarily block further proceedings in the Investment Council's lawsuit while it considers Foy's request.

"We don't think it's going to be a significant delay," said Charles Wollmann, a spokesman for the Investment Council.

The justices ordered the parties to submit legal responses by April 21. It's uncertain what the court will end up doing. A hearing could be scheduled later or the court could dismiss the case after reviewing written legal arguments by the council, which is represented by the attorney general's office.

Foy's request to the court comes as the justices are considering a separate case involving portions of the law that allows citizens to bring lawsuits on behalf of the state to recover damages for fraud against the government.

In that dispute, Foy wants the justices to overturn a ruling that it's unconstitutional to apply the law and its sanctions to activities that occurred before the statute went into effect in July 2007. The court held a hearing on that matter in November, but there's no deadline for the justices to issue a ruling.

The council has sued its former top manager, officials with private financial firms as well as a Richardson supporter. All contend there was no wrongdoing.

The agency alleges that state investment business was steered to Richardson's political contributors. A Richardson friend's son, who shared in more than $20 million in fees for helping investment firms land state business, has paid New Mexico nearly $329,000 to resolve a tax-evasion case.